I'd assume (new games at least) have a UID attached to them that is somehow associated with the profile (through achievements, perhaps).
[citation][nom]hellwig[/nom]Woah, wait, what? Does this mean ban the console from XBox Live, or ban people from their XBox? The latter seems not-to legal to me. Why wouldn't Microsoft ban any modded XBox they detected? Sounds like unauthorized network access to me, and they have a right to defend said network from "attack".[/citation]
Ban the console from Live - they'd have to purchase a new console, not just a new gamertag, if they want to play on Live again. And people who have modded Xboxes might have bought it used. The firmware hacks to play game backups (which also lends itself to piracy) are undetectable to the user.